Consumer Behaviour Of Low Income Groups

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The general objective of this case study is to analyze the consumer's behaviour of the Low income group with reference to growth opportunities in Marketing of Detergent in Brazil. The way involved in its scope allows some specific objectives to be outlined, among them, to understand aspects on: preferences, needs, people's habits and the decision making in relation to the products for purchase.

Consumer Behaviour is the process individuals or groups go through to select, purchase, use and dispose of goods, services, ideas or experience to satisfy their needs & desires (Solomon, et. al., 2009).

Figure 1: Model of Buyer Behaviour

Source: Marketing Management, Kotler, 2003, p.184.

Buyer's Characteristics

Figure 1 above has been used as a model to evaluate the buyer behaviour in Unilever's potential target market in Brazil. The key distinguishing characteristics have been depicted in Table 1, Figure2 and Figure3.

Table 1 : Washing preferences in Northeast & Southeast

Northeast (NE)

Southeast (SE)

Marketer's Interpretation about NE

Possession of Washing machine

28%*

67%#

Due to low income, consumers in NE region cannot afford washing machine like SE counterparts. This seems like a good market for laundry soaps and low priced detergents

Usage of bleach for tough stains

73%*

18%#

Since clothes are hand washed in NE than SE, this can be a good attribute for a new product

Market penetration

Laundry Soap

Detergent Powder

Due to the already existing market penetration of laundry soap in NE, the competition would be intense and it will be difficult to introduce a product

Perceive Washing as

Pleasurable

Chore

Washing clothes is a pleasurable activity in NE, so if they are satisfied with the product, we can experience continued sale, ultimately increasing brand loyalty

Frequency of washing clothes

5 times a week*

3.9times a week#

Clothes are washed more in NE means higher consumption of product

Importance of Clean clothes

Very Important

Less Important

Since cleanliness of clothes is related to the symbolic value in NE, consumption of laundry washing product will be more

Income

Low income

High income

NE consumer, despite all above criterion, will prefer to buy low priced laundry product

Washing place

Public place

Home alone

Since clothes are washed in public laundry in NE, the product can sell itself through word of mouth & by experiencing the product first hand

*Recife #Sãu Paulo

Figure 2: Northeast washing habit

Figure 3: Southeast washing habit

Cultural factors

Brazil is divided in two main clusters Northeast & Southeast. Northeast is considered to be less developed as compared to its Southeastern counterparts in terms of literacy, annual income, etc. but has very rich and diverse culture with mostly African influence. Out if 48million population, 30.2million is mix of African & European origins.

"Brazilians are concerned about their position in a social class, because no class interacts with another social class unless it is in a professional way" (http://internationalbusiness.wikia.com/wiki/Brazil's_social_classes). Brazilians are known for maintaining their lifestyle and pretend to be very concerned about their position despite belonging to low income group. Even with their low income, North-eastern feels proud to keep themselves and family spotlessly clean. It is perceived as a duty of mother to keep her family clean and is considered as her dedication towards her family.

Social factors

As majority of population in Northeast belongs to low income group, not many families could afford washing machine and hence prefer to do laundry by hand. As a homemaker, northeast women had lot of free time and therefore invested their time in washing clothes at public laundries or at a river or pond with their friends. And since they were meeting their friends and got to gossip and chit-chat, they considered it as a pleasurable activity.

Personal factors

The economic situation of people living in northeast was not very good. Around 25.4 million people were categorized as low income group and live on less than two minimum wages (E- & E+ class). Annual income of an individual is $1700. Due to very low income, people in Northeast could not afford to buy clothes very often and therefore reuse their clothes again and again and this meant that they had to do their laundry frequentlt, almost 5 times every week.

Psychological factors

In northeast, the main psychological factors that affect consumers buying behaviour are brand value & perception. People in Northeast developed few key attributes which would determine their attitude towards choosing a particular brand. They wanted a detergent which had strong whitening power with very little per wash usage quantity so that it did not affect their budget. Clothes should smell good and retain their softness after every wash. The product should have ability to remove tough stains without using laundry soap or bleach. It should dissolve well in water with no granules left which could stick with clothes. The packaging holds relatively less importance but should be in cardboard boxes with the volume that low income consumer can afford. And it should not harm the colours as they own few clothes.

Buying process

A consumer in NE goes through the complete buying process before purchasing a new product. Starts with the

problem recognition: consumers feel dissatisfied with the current products in the market and they desire product like OMO but it poses as a budgetary constraint

they indulge in an informative search while socializing in networks at public laundries, river/pond

they evaluate all the option and choose a brand which satisfies maximum key attributes and budgetary constraints

After using the product, they share their experiencing with their friends while gossiping about personal & home cleanliness

Brand players & Strategy

Unilever is a multinational brand with its operations in 150 countries. It entered the Brazilian market way back in year 1929 and in 1957 Unilever was the first company to introduce detergent in Brazil. Since then detergent segment is considered as a Cash Cow for Unilever Brazil and helping the other divisions of non home care product under its umbrella. Unilever was clear leader of the market in 1996 having a market share of 81%. The brands which Unilever was selling were Omo, a premium detergent powder for high income group; Minerva, for middle income group both in laundry soap & detergent and; Campeiro for lower middle class.

Proctor & Gamble, the biggest competitor of Unilever, started its Brazil operation in 1988 and was already present in 80 countries. P&G took over a Brazilian detergent company, Bombril in 1996 and, made manufacturing improvements to rebrand Bombril's brands as its global brands - Quanto to Ace, Odd Fases to Bold.

Detergent

Detergent powder has 97.2% of market penetration with the total consumption of 11.4kg/year/buyer in Northeast. Reasons are income of the consumer, they cannot afford washing machines and consumer behaviour, prefer laundry soap due to perception of using detergent to add pleasant smell only.

Product

Unilever is currently selling 3 brands for different income group. Omo, Brazil's top brand across all categories and satisfies all the key attributes that a consumer ever wanted. Its USP is its ability to remove stains without using laundry soap and bleach. It also delivers pleasant perfume smell and softness to the clothes. It has four brand extensions.

Minerva and Campeiro fulfil only some attributes as compared to Omo. Minerva has the emotional appeal due to its long existence in the market and Campeiro was valued by consumers for its price (though they were not quite satisfied with its effectiveness). All three brands have same type of packaging, cardboard type box with option of 1kg or 500gms.

Price

Detergent market is dominated by Unilever which has 75% of market share. Omo is clear leader with the market share of 52%, although it is sold at $3/kg, highest of all. Other products are Minerva which had a market share of 17% & is sold at $2.4/kg and, Campeiro which has a market share of 6% is sold at $1.7/kg, cheapest of all. In detergent industry Unilever's main competitor is P&G with its 3 brands - Ace, Bold &Pop and ASA with its Invicto detergent powder. P&G's market share is only 17.5% but pose a great threat to Unilever due to strong R&D and marketing expertise. The market share of these competitor brands is significant and could not remain unobserved. Ace has 11% share, Invicto (ASA) has 5% share and other P&G product sums up to 6% of share.

It is evident from the above analysis that pricing strategy is simply based on the attribute of the product. The Price strategy followed by Unilever is Price lining strategy. If a consumer wants a simple detergent with not much attributes she can find Campeiro priced at $1.70/kg. A better quality product with moderate attributes is Minerva at $2.40/kg and best product with maximum attributes, Omo at $3.00/kg. The pricing of Omo is based on Price Quality Inference which means higher the price, higher the quality and has thus developed as a Brand Equity for Unilever.

Promotion

Omo's promotion was done mainly highlighting its key features. Recent Omo advertisements, clearly delivered an idea that Omo can wash tough stains easily and laundry soap and bleach are not required. Minerva advertising mainly focuses on softness of clothes after wash and Campeiro focus on its low price. These kind of promotion helps in attracting consumer giving them clear reason for buying a product.

Place

Unilever used generalist wholesaler for the distribution for all of its products. Generalist wholesalers cover wide area and hence are able to deliver product.

Laundry Soap

Laundry soap market is mainly dominated by local manufactures with the market share of 81%. The market penetration of laundry soap in Northeast is 96.6% with the consumption of 20.4kg/year/buyer. Unilever has only one product, Minerva in this category having market share 19% and its main competitor is ASA's Bem-te-vi with 11% share. Minerva is sold at $1.70 for 5bars pack whereas same pack Bem-te-vi is sold at $1.15.

Analysis of Strength, Weakness, Threats and Opportunities

Strength

Strong Brand portfolio of detergent

USP: Omo's positive brand equity

Market share 75% - Competitive advantage

High Barriers to entry in Detergent powder due to capital intensity

17% detergent powder growth rate

First to introduce detergent powder in country - Brand knowledge, market penetration & top of mind awareness is high

Product usage is high

Weakness

Slow growth rate of Laundry Soap

Omo in perceived to be a good quality product but priced high

No efficient distribution channel to reach the target market

Internal resistance

ineffective Promotion strategy, inconsistent with Consumer expectations for Minerva & Campeiro

Only one brand of laundry soap

Internal Environment Analysis

External Environment Analysis

Opportunity

Changing economic scenario - growing GDP per capita income since introduction of Plano Real

New market

Increase volume of production

Huge target market - 48million population

Innovation

Threat

Strong R&D and marketing expertise - P&G

Consumer unemployment and illiteracy

Local competition - Increases competition from small Brazilian companies

Chances of price war

P&G could enter laundry soap market

Low barriers of entry in laundry soap market

Market strategy

48 million consumers in Northeast predominantly belong to low income group and targeting this group will be crucial for Unilever, since it is relatively new market but dominated by local manufacturers. Also, Unilever, and neither any of its competitors, have ever operated in low income group segment in Brazil and therefore don't have much experience in it. But Unilever may remarkably skim on first mover advantages, provided these forward strategies are implemented on time. Considering the size of the target market, it will represent great opportunity for a quick and substantial growth.

The way forward for Unilever Brazil is to answer the key questions - What sets its product and company apart from its competitors? What value does it provide and how is it different than the alternatives? Unilever may decide to promote a different attribute of its product, or it may find entirely new opportunities to create new products. Either way, it'll strengthen its business in both short and long term.

Profiling the market

The size of low income group market is fairly big in Northeast. There is no major competitor but presence of local manufacturers is a threat

Since low income group is targeted for the first time, it is in introductory to growth stage of lifecycle and has potential to get exploited

Segmenting the market

The consumer in Northeast wanted a product which is of low price and provides good value for money. The main attributes they wanted are strong whitening, retain clothes softness and pleasant smell. Since northeast people use laundry soap more for stains, they will gradually shift towards detergent powder with the increase in income and ability to buy a washing machine

Brand Strategy

Brand is crucial for products and services sold in huge consumer markets. Branding strategy can include Line Extension, Brand Extension, Multibrands and New Brand. Below are the options Unilever can exercise:

Rebranding of Omo

Since Omo banks on its class and quality, if rebranded for low income group it will lose its identity as quality product and will cannibalize itself

Campeiro Brand Extension

Campeiro is already perceived as low quality product and if the price is further reduces it will make further negative effect on consumer psychology and affect the sales

Launch a new brand

Can introduce a whole new product but the cost of production initially would be very high due to R&D into its development and market positioning would be difficult due to higher price. Rumours of large scale reduction in brand portfolio

Introduce Brand from International portfolio

Introduction of a brand from international portfolio is a feasible option. Can choose an already established brand form neighbourhood countries having similar culture and needs

4 P's for Introduction of new brand from International portfolio

Product

Cleaning and whitening are "more-is-better" attribute

Packaging can be of different sizes. Introducing 500gms, 750gms, 1.2 kg & 1.5 Kg

500gms and 750gms pack can be in attractive plastic pack

1.2 kg and 1.5 kg can be in traditional attractive cardboards boxes

Quantity of 1.2kg will have psychological effect on consumer mind and make them feel that they got more quantity at the price of traditional 1kg amount

Low Income consumers must this new brand as being an Omo in a plastic bottle

Pricing

The new product should be cheaper than Campeiro

The price of Campeiro is $1.70/kg; therefore, the new product should be priced around $1.45-$1.6 per kg to least cannibalization

Breakup of which is formulation cost will be $0.90, Plastic packaging will cost $0.24 & cardboard boxes will cost $0.40 due to bigger size. Promotion cost is around $0.30 and the cost involved in introduction of new brand

The pricing of Campeiro can also be increased by $0.10/kg as a part of push strategy for new product

Customers will always prefer a product with more attributes, but they might not prefer it enough to offset the additional attribute costs. Addition of each attribute will lead to increase in product price. Unilever should conduct appropriate research to assess customer preferences for more attributes and then compare that preference with the input cost of providing more attributes.

Place

For selling this low prices product for low income group, Unilever has to change its distribution strategy

For this new product Unilever has to choose specialized distributors to extensively reach the smaller retailers from which low income group usually purchase

A specialized distribution strategy should be implemented in ALL the small stores of the Northeast region for extensive reach

Promotion

The main focus of Unilever should be having in-store promotion which will inform the consumer about the new product and its attributes

There product should have good visibility, in small stores also as most low income consumer make their purchases from small store rather that bid supermarket

Each and every consumer who enters into a small store must realize that Unilever has created for him, his own version of Omo. This new product should also be advertised on TV ads and billboards to inform consumers about the introduction of new product

Low Income consumers must see new product as being an Omo in a plastic pack just for them.

Competitive Positioning

"PRICE"

"ATTRIBUTES"

SAME

LESS

NO MENTION

7 (Exclusive "Price" Emphasis)

SAME

LESS

NO MENTION

8(Exclusive "Attribute" Emphasis)

Table 2: Model of Competitive Positioning

Dominated options, such as less benefits at a higher relative price, are "blacked out" (i.e., infeasible) because they are always inferior to other competitive positioning options.

New product will fall in category 4 in table 2. Where the expected price of new product is less and the attributes satisfying consumer are high. It should be price less than Campeiro but should have more attributes than any of the local brand.

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Sunday, September 13, 2015